As part of our ongoing series of articles discussing the Big Beautiful Bill Act (BBBA), this article examines some of the provisions that may impact some of your employee benefits.
Expansion of high-deductible health plans (HDHPs) and Health Savings Accounts (HSAs)
If you’re enrolled in a HDHP and contribute to an HSA, you’ll be able to take advantage of certain benefits starting in 2026.
- HDHPs can cover the costs of telehealth services before your deductible is met. This provision originally went into effect in the COVID era as a temporary measure. BBBA makes this change permanent.
- If you participate in a Direct Primary Care (DPC) arrangement, you can contribute to an HSA, which can pay for monthly DPC fees out of your HSA as long as your monthly DPC fees are $150 or less ($300 or less for families).
- Your HSA can be used to pay up to $500 per year for qualified fitness center memberships and exercise programs for yourself or $1,000 for your family.
Changes to dependent care benefits
BBBA may bring some tax relief for families burdened by the high cost of childcare. Starting in 2026:
- If you have a Dependent Care Flexible Spending Account, your maximum annual pre-tax contribution will increase from $5,000 to $7,500 if you’re married (and increase from $2,500 to $3,750 if you’re married and file separately).
- The maximum dependent childcare credit will rise from 35% to 50% for individuals with adjusted gross incomes (AGI) of $15,000 or less. This credit begins to phase downward gradually as AGI increases until stabilizing at 20% for individuals with AGIs of $103,000 or more.
Continuation of employer student loan payoff contributions
If your company has taken advantage of the CARES Act provision that allows them to make annual tax-free contributions of up to $5,250 to help you pay off your student loans, there’s good news.
This provision was set to expire at the end of 2025, but BBBA makes this benefit permanent. If your company doesn’t offer this benefit, this will hopefully encourage them to participate.
Benefits for overtime workers and service industry employees
We mentioned this before, but it’s worth reiterating that, starting this year, many workers will benefit from specialized deductions.
- Many service industry workers can deduct up to $25,000 in tips per year. This benefit begins to phase out for those earning more than $150,000 per year.
- Many workers can deduct up to $12,500 in overtime pay per year. This benefit begins to phase out for those earning more than $150,000 per year.
For employees to be able to take advantage of these tax breaks, employers will need to keep track of their tip income and overtime in their payroll system and report this income on their pay stubs and annual W-2 statements.
Other changes
Not all BBBA changes are necessarily beneficial.
For example, employees will no longer be eligible for tax-free employer reimbursements of their relocation expenses or bicycling commuting expenses.
Contractors and side-gig workers may find that their tax filing chores become more complicated.
Why? Because the annual Form 1099-NEC and 1099-MISC reporting threshold will rise from $600 to $2,000.
Essentially, this will mean that if you’re paid less than $2,000 by one of your freelance or side gig clients, they won’t need to send you these tax statements. You’ll still need to report this income on your tax return, which means you’ll have to keep track of how much and where it comes from on your own.
If you have questions about any of these provisions, talk to your company’s benefit manager. For tax-related questions, it’s best to speak to a tax professional.
This material has been provided for general informational purposes only and does not constitute tax advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult with a tax professional on any tax-related issues.
This article was authored by David Jaeger and Jeffrey Briskin. David is a financial advisor with Canby Financial Advisors, a SEC-registered investment adviser. SEC registration does not constitute an endorsement by the SEC nor a statement about any skill or training. David can be reached at 508.598.1082 or djaeger@canbyfinancial.com. Jeffrey Briskin is Director of Marketing at Canby Financial Advisors.
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